1. Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine November 8 Continue with Old Machine Alternative 1 Replace Old Machine Alternative 2 Differential Effect on Income Alternative 2 Revenues: Proceeds from sale of old machine Costs: Purchase price Annual manufacturing costs (6 yrs.) Income (loss) The proposal to replace the machine should be PLATE PR 10-2A Differential analysis for machine replacement proposal Obj. 1 Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, 10-year life $89,000 Annual depreciation (straight-line) 8,900 Annual manufacturing costs, excluding depreciation 23,600 Annual nonmanufacturing operating expenses 6,100 Annual revenue 74,200 Current estimated selling price of machine 29,700 New Machine Purchase price of machine, six-year life $119,700 19,950 Annual depreciation (straight-line) Estimated annual manufacturing costs, excluding depreciation 6,900 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Instructions 1. Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. List other factors that should be considered before a final decision is reached